Billionaire industrialist Gautam Adani. Photo: AFP

“Cronyism” is a term that came to prominence in the 1990s, especially during the Asian financial crisis. After posting some of the most impressive growth rates in the world, the so-called Tiger economies – South Korea, Taiwan, Singapore, Indonesia, Malaysia, Thailand and Vietnam – saw their stock markets and currencies lose about 70% of their value.

But the fallout was mainly due to the nepotism and corruption that marked the collapse of Asian Tiger economies. It must be observed that the closed networks of business groups and their connections – filial, financial and structural – to political power in these countries had made self-correction by the market difficult and created a disfigured form of capitalism.

But these economies had been the star fighters for post-World War II capitalism as they pursued an economic path much favored by the Bretton Woods institutions. It not only pushed the market and integrated the economies with global capitalism, but spurred an era of prosperity in the region.

But when a large influx of money occurs in smaller economies, especially developing ones, it gives birth to nepotism, and the power of political elites with little transparency provides an excellent case for cronyism.

One country where nepotism and cronyism have historically been embedded in society is India. 

Shifting from cronyism to oligarchism

Unlike in many other developing countries, cronyism has deep roots in India. And unlike some other countries, we can say it is embedded in the basic premises of Indian economic philosophy. But post-liberalization, cronyism has gained a virulence that has transcended all regions, sectors, officials, the executive and the judiciary.

That’s why it became a major factor behind the massive loss of the UPA (United Progressive Alliance) II government in the 2014 general election. So many large scandals involving businesses and government had unfolded during that regime. But still, the situation has not changed.  

Under Prime Minister Narendra Modi’s regime, the country is moving from crony capitalism to oligarchy. Crony capitalism is when businessmen with friends in power get undue favors from the government, but in an oligarchy, even among the capitalists, some get favored more than others.

It is not enough to help one player. There are several direct instances where Modi has bestowed favors on some of his key businessman friends. One of the leading names is of course Ambani. 

But Modi’s friendship with another man has set milestones in both of their careers, and that man is Gautam Adani. This friendship goes back to 2003, when none of the country’s leading businessmen publicly stood by Modi’s side because of the handling of the Gujarat riots. But Adani broke ranks with the old business elite, potentially risking his future. And this gamble paid off.

Along with Reliance Industries chairman Mukesh Ambani, Gautam Adani is today one of the most visible tycoons in the country, whose prominence has accelerated in the years since Narendra Modi was elected prime minister in 2014. 

According to the Forbes list of India’s richest men in 2014, Adani ranked 11th, with a net worth of US$7.1 billion. But currently, he is the second-richest man in India, with a net worth of $50.5 billion in 2021. That’s a sevenfold increase. But how has his wealth increased so quickly, and what was the reason behind this massive surge? 

Adani’s own background was modest. He was a college dropout from Gujarat who, after working in Mumbai’s diamond industry, eventually set up his own commodities trading business. In the beginning, he was a minor figure, hardly known outside his home state.

But fueled by quantities of debt that easily outstripped those built up even by adventurous tycoons like Vijay Mallya, Adani became one of India’s most successful self-made industrialists in less than 10 years.

Simultaneous rise of Modi and Adani

The rapid expansion of Adani can be compared with those of industrial giants of earlier eras. He questioned the hegemony of India’s public-sector infrastructure by building private railways and power lines. Because of lack of access to domestic coal, he bought mines in Indonesia and Australia and transported their output home through his own port. In this process, he built a vertically integrated global supply chain of his own.

But above all, his overall success rests on a crucial factor: Narendra Modi.

The two men enjoyed symbiotic careers. Adani’s business began taking off in the years following Modi’s arrival as Gujarat chief minister back in 2001. Modi’s pro-business policies helped Adani expand. Many of his projects were the true architecture of Modi’s so-called Gujarat Model. 

In the first four years of his first term as prime minister of India, Narendra Modi traveled outside the country on more than 41 occasions to 52 different countries. Among the businesspeople who accompanied him on many of these foreign trips was Adani.

The relationship with Modi is far from covert. Because whenever governments have brought in changes in policies, some corporate groups have benefited more than others. One of the prominent names is the Adani Group. 

In August 2016, the Modi government brought in an amendment in the Special Economic Zones rules to include a provision on claims for refunds under the SEZ Act of 2005. The original act under which the SEZ rules were framed did not initially provide any provision for refunds of any kind. But after this amendment was introduced, it helped Adani Power Ltd to claim refunds on customs duties of up to $77.48 million. The company claimed that it had paid duties on raw materials and consumables such as coal.

Similarly, in November last year, the Modi government tweaked the rules on the bidding for coal blocks. The coal-auction rules set the floor price for the bids to be at least 10% more than the market price of coal. Crucially, the market price was pegged to the National Coal Index.

The new model allows auction bids to be counted as variable costs to be covered in the final price charged to consumers, something that was not permitted previously. Significantly, the Adani Group has placed the highest number of bids in India’s coal-mine auctions.

For the first time, the port-to-power conglomerate Adani Enterprises owns a coal mine in India. The company is the largest mine developer and operator or end-to-end mining contractor in India, with contracts for 11 mines and one coal-washing facility. It was a great leap for the company.

The Adani Group’s rise to prominence in Gujarat was itself closely linked to Narendra Modi’s tenure as chief minister of the state, but when Modi came into the national limelight, Adani too moved center-stage, and his enterprise’s influence has increased in various domains across the country. 

India’s rising infrastructure czar  

The clearest indication of this came in September and October 2018, when the Modi government awarded 126 contracts to Adani’s firm to set up and operate piped natural-gas networks and fuel stations across India. The largest winner of the bids was Gujarat-based Adani Group.

In a bidding process that saw 23 participants for 126 tenders, the group won 25 bids – 15 on its own and 10 in a joint venture with government-owned Indian Oil Corporation. These gas contracts were just part of a larger pattern of growth for the Gautam Adani-led infrastructure conglomerate.

Some of the expansion has come through acquisitions. In 2018, apart from winning the gas bids, the group acquired Reliance Power’s electricity transmission business in Mumbai, GMR’s thermal power project in Chhattisgarh, Larsen & Toubro’s Kattupalli port near Chennai, and a power transmission line in Rajasthan. 

Apart from that, in February 2019, When the Modi government invited bids from private players to manage six airports, the Adani Group, despite being a newcomer to airport management, trumped established players like GMR, which had built Navi Mumbai International Airport and Maldives’ airport, and bagged all six contracts without having prior experience in the development or operation of airports.

After spending the majority of his business’ time around coal and trading, Adani is now focusing on infrastructure aggressively. In less than four years, the group has diversified its areas of operation from coal mining and trading to logistics (ports, shipping and rail), power generation, real estate, public transport, consumer finance, and defense. He is mainly investing in long-term projects especially in the critical sectors of the nation’s infrastructure.

After taking control of seven airports, he now controls almost a quarter of India’s air traffic. He is going one step further by investing in future infrastructure for renewables, which completely aligns with Modi’s green-economy vision of doubling India’s renewable power by next year.

Adani has unveiled plans to boost his renewable-energy capacity almost eightfold by 2025, positioning himself to benefit as the government debates ambitious climate targets that would cut net greenhouse-gas emissions by mid-century. 

Recently, French oil major Total SA’s $2.5 billion investment in Adani Green Energy Ltd was a clear sign that global companies increasingly under pressure to invest in environmental assets are eyeing India’s 1.3 billion energy users. Looking at the trends and government policies, there is no doubt that Adani Energy is going to be a major beneficiary.

So there is no astonishment that when the majority of poor Indians were not able to meet their basic needs during the pandemic, Gautam Adani added more than $50 billion to his fortune.

Looking at his current rate of growth and Modi’s blessings, he is set to be the Cornelius Vanderbilt of India, and India is now moving from a democratic state toward an oligarchy.  

Ravi Kant

Ravi Kant is a financial writer with a deep passion for technology and economics, and also covers international politics and cybersecurity. He has wide experience in the financial world and his analysis has been published in leading magazines such as Mogul News and The Indian Economist. He is author of the book Coronavirus: A Pandemic or Plandemic. He tweets by @Rk_humour